The Importance of Trust as an Agribusiness Advisor

THE IMPORTANCE OF TRUST IN THE AGRIBUSINESS VALUE CHAIN

Trey MaloneAssistant Professor and Extension Economist

Behavioral Insights for Agricultural Supply Chains (BIAS)

• Topics include:• “Why do we sell milk as ‘2% Fat’ as opposed to ‘98% Fat Free’?”

• “Are consumers really confused by plant-based milks and proteins?”

• “How Will Mandatory Labeling of Genetically Modified Food Nudge Consumer Decision-Making?”

• “How have ranchers actually responded to the Endangered Species Act?”

• “Do voters blame the President for the agricultural trade war with China?”

• “What makes people think like a farmer?”

• “Can a grower’s friends influence his tillage decisions?”

• “How important is trust when growers deal with invasive pest issues?”

• “How does an advisor develop trust with untrusting people?”

October 26, 2018 TRUST IN THE AGRIBUSINESS VALUE CHAIN 2

Behavioral Insights for Agricultural Supply Chains (BIAS)

• Topics include:• “Why do we sell milk as ‘2% Fat’ as opposed to ‘98% Fat Free’?”

• “Are consumers really confused by plant-based milks and proteins?”

• “How Will Mandatory Labeling of Genetically Modified Food Nudge Consumer Decision-Making?”

• “How have ranchers actually responded to the Endangered Species Act?”

• “Do voters blame the President for the agricultural trade war with China?”

• “What makes people think like a farmer?”

• “Can a grower’s friends influence his tillage decisions?”

• “How important is trust when growers deal with invasive pest issues?”

• “How does an advisor develop trust with untrusting people?”


Learning Objectives

• Discuss the heterogeneity of beliefs regarding American agriculture

• Identify how that confusion and uncertainty creates a deep need for trust

• Describe how relational trust influences agribusiness decision-making

• Outline the attributes most important to developing trust in relationships with agriculture


#1: Discuss the heterogeneity of beliefs regarding American agriculture

• Less than 1% of people directly involved with agriculture

• Proposition 777: Oklahoma Right to Farm

• 71.4% of variation in voting explained by agricultural employment


Dunning-Kruger Effect


What do people think, and how confident are they about it?

• placing additional regulations on farmers to adopt more sustainable practices would…


#2: How that confusion and uncertainty creates a deep need for trust

Shubert’s Fisherman and Trout

• With clarity the trout (consumer) has the edge. But muddy the waters, and the balance of power shifts to the fisherman (companies).

• Counting on high search opportunity costs for consumers, companies seem to be trying to muddy the waters and segment markets on real differences in demand for fictional differences in food.



Takeaways

• The less knowledgeable a buyer is about what they are purchasing, the more power the seller has

• With great power comes great responsibility…


Farmers talk. This is why that matters.

• Ongoing tillage intensity project with MI soybean growers.

• In collaboration with James DeDecker, Director of the Upper Peninsula Research and Extension Center



• Why tillage?



Tillage intensity project with James DeDecker, Director of the Upper Peninsula Research and Extension Center as part of a long-term tillage intensity project with Michigan soybean growers.

FARMER NAME

FARMER NAME

FARMER NAME



Central Region Social Network


Northeast Region Social Network

Southwest Region Social Network

Takeaways

• Even when people think they’re isolated, they aren’t• At least in a rural ag community

• Even though tillage decisions should be made on a case-by-case basis, the tillage intensity decisions of neighbors are likely to significantly influence other neighbors


#4. Outline the attributes most important to developing trust in the value chain

𝑇𝑟𝑢𝑠𝑡 =𝐶𝑟𝑒𝑑𝑖𝑏𝑖𝑙𝑖𝑡𝑦 + 𝑅𝑒𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑦 + 𝐼𝑛𝑡𝑖𝑚𝑎𝑐𝑦

𝑆𝑒𝑙𝑓 𝑂𝑟𝑖𝑒𝑛𝑡𝑎𝑡𝑖𝑜𝑛

October 26, 2018 16TRUST IN THE AGRIBUSINESS VALUE CHAIN

How relational trust enters into grower decisions

•Credibility – the quality of being believable

•Reliability – the quality of being dependable

•Intimacy – the quality of being familiar

•Self-Orientation – the quality of being overly concerned with yourself relative to others


•Economists traditionally think people have relatively stable preferences• Examples: I like steak more than chicken, I like

lower prices, etc.

•Beliefs and perceptions are much more fragile•Relational trust fits here

October 26, 2018


TRUST IN THE AGRIBUSINESS VALUE CHAIN 18

• Discrete choice experiment on invasive insect pest management with Braeden Van Deynze and Scott Swinton

• Soybean growers contacted via mail, survey conducted online (N=288 choices)

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TRUST IN THE AGRIBUSINESS VALUE CHAIN

• Discrete choice experiment on invasive insect pest management with Braeden Van Deynze and Scott Swinton

• Soybean growers contacted via mail, survey conducted online (N=288 choices)

October 26, 2018 20



• Empirical Results: Interpreted as what happens to a grower’s choice given a 1% increase in their trust of a producer

0.23%

0.38% 0.43%

Farmer Coop Dealer

Trust Elasticities

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• Key Takeaways• Relational trust matters for everyone but…

• The impact of a change in relational trust is almost twice as beneficial/harmful for businesses (e.g. input dealers and coops) as it is for other farmers

Go above and beyond to develop those relationships with your clients


How do I develop relational trust with clients?


• 193 members of the Kansas Farm Management Association

• Best – Worst Estimation• Asked participants to say which items were most/least important

• Just as true for people who are untrusting

October 26, 2018 24



• Top 3 ways to develop:• Self Orientation

• Focuses on defining the problem, not guessing the solution

• Listens without distractions

• Asks me to talk about what’s behind an issue

• Reliability• Follows through on actions requested by me

• Makes specific commitments and delivers on them

• Adapts to changing circumstances and situations

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• Top 3 ways to develop:• Credibility

• Does not lie or exaggerate

• When they don’t know, they say so

• Well researched and knowledgeable of topic

• Intimacy• Able to be candid and upfront about situations

• Stayed in contact via calls, visits, etc.

• Not afraid to make conversation

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A Cautionary Tale

“The advisor who thought he knew it all.”

– Francis Epplin

“The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.”

– F.A. Hayek


THE IMPORTANCE OF TRUST IN THE AGRIBUSINESS VALUE CHAIN

Trey MaloneAssistant Professor and Extension Economist

Empirical Results


Variable EstimateAnother farmer 3.705* (0.786)Another farmer's fee -0.083 (0.052)% increase in the change the neighbor farmer is delayed three days -0.052* (0.014)Trust in another farmer 0.057 (0.048)

Coop 3.925* (0.788)Coop Fee -0.070 (0.069)% increase in the change the coop is delayed three days -0.052* (0.012)Trust in the coop 0.069 (0.036)

Input Dealer 4.077* (0.645)Input Dealer's Fee -0.142* (0.044)% increase in the change an input dealer is delayed three days -0.033* (0.008)Input Dealer's Trust 0.095* (0.029)

Spray Myself 2.575* (0.367)

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Variable Estimate

Another farmer 3.705* (0.786)

Another farmer's fee -0.083 (0.052)

% increase in the change the neighbor farmer is delayed three days -0.052* (0.014)

Trust in another farmer 0.057 (0.048)

Coop 3.925* (0.788)

Coop Fee -0.070 (0.069)

% increase in the change the coop is delayed three days -0.052* (0.012)

Trust in the coop 0.069 (0.036)

Input Dealer 4.077* (0.645)

Input Dealer's Fee -0.142* (0.044)

% increase in the change an input dealer is delayed three days -0.033* (0.008)

Input Dealer's Trust 0.095* (0.029)


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Variable Estimate





Coop 3.925* (0.788)

Coop Fee -0.070 (0.069)








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Variable Estimate





Coop 3.925* (0.788)

Coop Fee -0.070 (0.069)








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The Importance of Trust as an Agribusiness Advisor

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